Double certified: Two standalone claims for abuse of dominance receive seals of approval in the UK Competition Appeal Tribunal
The first Collective Proceedings Order (“CPO”) was made in the United Kingdom in opt-out collective competition proceedings in Merricks v Mastercard Inc. and Others on 18 August 2021 (a practical inevitability after the Supreme Court’s judgment in that case). Hot on the heels of that decision, the UK’s Competition Appeal Tribunal (“CAT”), has given the seal of approval to two further applications for collective proceedings. On 28 September 2021, the CAT granted a CPO in Le Patourel v BT Group Plc and British Telecommunications Plc, (“Le Patourel”) and on 19 October 2021, the CAT granted a CPO in Gutmann v First MTR South Western Trains Limited and Another; London & South Eastern Railway Limited (“Gutmann”). Mr. Gutmann’s claim becomes only the third competition law claim to be certified by the CAT for pursuit by way of collective proceedings in the UK.
Le Patourel and Gutmann are noteworthy, as both are standalone claims for breach of competition law. That is to say, they do not rely on a pre-existing regulatory decision to establish liability, but are brought on the basis of free-standing allegations of liability, supported in each case by evidence.
In both Le Patourel and Gutmann, the Defendants attempted to strike-out and/or sought summary judgment to dismiss the class representatives’ claims, on the basis that there were no reasonable grounds for certification and that the claims themselves had no real prospect of success. In each case, the CAT dismissed the Defendants’ applications and allowed the collective claims to proceed to trial. The CAT also confirmed that the claims were rightly brought on an ‘opt-out’ basis (whereby class members do not have to sign up other than for the purposes of the distribution of damages), as opposed to on an ‘opt-in’ basis (where class members would have to actively sign up to the claim). The CAT’s judgments, therefore, demonstrate the difficulties defendants face in seeking to eliminate claims at an early stage in collective proceedings, given the nature of the certification test that has been provided for in the statutory regime, as articulated in the Supreme Court decision in Merricks.
More broadly, these recent successes are positive news for private enforcement of competition claims in the UK and for the opt-out collective proceedings regime. Crucially, the speed at which the Le Patourel claim has moved in less than 10 months – from filing in January 2021 to a positive certification judgment in September 2021 – indicates how quickly the CAT is able to deal with issues of certification. Certainly, with several other collective claims awaiting the grant of a CPO, and a certification hearing in the Maritime Car Carriers case coming up later this month, this is an exciting period for class action practitioners, as the opt-out collective proceedings regime, first introduced by the UK Consumer Rights Act 2015 is, at last, gathering pace.
The Le Patourel claim alleges exploitative conduct by the formerly state-owned British Telecom (“BT”) in imposing unfair and excessive prices on its customers in two markets for the provision of landline telephone services to residential addresses. Mr. Le Patourel’s claim arose following a review conducted by the UK's communications regulator, Ofcom, in February 2017. In its concluding review, published in October 2017, Ofcom found that BT was the dominant provider in these markets and that there was insufficient competition, causing detriment to consumers. Shortly thereafter, BT voluntarily offered commitments to Ofcom to, amongst other things, provide for certain affected customers a forward-looking line rental reduction of £7 per month as from 1 April 2018. Ofcom accepted BT’s commitments and did not make any infringement finding against BT.
The Le Patourel claim relied on the findings of the Ofcom review in alleging that BT abused a dominant position on the markets for landline telephone services by engaging in excessive pricing. The sheer scale of the price reduction (£7 per month, out of a fee of £18.99 – almost a 40% discount) lies at the heart of the allegation that BT’s pricing practices were abusive. It is also relevant to the context of the claim that the markets where these pricing practices were occurring were characterised by elderly or even vulnerable consumers, with low levels of switching. Where customers benefitted from the price reduction, the claim was for the period up to the imposition of the price reduction (i.e., until 1 April 2018). Where customers have not benefitted for a price reduction, the claim alleges that the excessive and unfair pricing is ongoing. The total amount claimed at present is £469 million, exclusive of interest.
The Gutmann claims relate to train “boundary fares”, also known as “extension tickets,” which allow London rail passengers who own a Travelcard (a prepaid card allowing unlimited travel on trains for a specified period of time and within designated geographical “zones”) to travel beyond the zones covered by their Travelcard without doubling up on payment. Mr. Gutmann alleges that the defendant companies in charge of operating London’s Southeastern and South Western routes do not make boundary fares sufficiently available for Travelcard holders to purchase or make passengers aware of their existence, leaving customers with little option but to buy a higher fare. Mr. Gutmann further alleges that this imposition of higher prices is an abuse of the train operating companies’ dominant market position on their respective routes, and in breach of UK competition law. Although these boundary fares are available in principle, the claim alleges that the fares were not readily available through retailers’ online platforms or over the telephone. Boundary fares were also rarely offered at ticket counters in London’s busiest railway stations unless expressly requested by passengers, and some in-station ticket vending machines did not offer boundary fares at all. These allegations were supported by an independent survey conducted before the claims were issued.
At the time of filing in February 2019, the claim was worth over £93 million in damages (exclusive of interest), and it is estimated that around three million Travelcard holders who have travelled on Southeastern and South Western routes since 1 October 2015 (i.e., the earliest date from which collective claims can be brought in the CAT) may be eligible for compensation.
The CAT’s decisions in Le Patourel and Gutmann were both challenged on the grounds that the claims had no real prospect of success, with the Defendants in each case contending that the claims should thus either be struck out or subject to summary dismissal. Both claims were also challenged on the ground that they should not be brought on an opt-out basis (a point which is central to the viability of claims on behalf of large groups of consumers).
In the Gutmann claim, the challenges brought by the Defendants were even more wide ranging. The Defendants sought to challenge the eligibility of the claims on a variety of grounds, focusing in particular on the fundamental right of the Defendants to explore issues of causation on an individual basis, given the alleged heterogeneity in causation across the identified class of claimants.
This article first focuses below on two aspects that the judgments have in common and that are potentially of wider application to other pending cases: (i) the assessment of merits at the certification stage; and (ii) the CAT’s consideration of opt-in vs opt-out, distribution issues and ‘uptake’ (meaning the overall claim-filing rate by individual class members). It then sets out the key findings arising from the Gutmann claim on eligibility and considers the impact of these findings for future actions.
Points of comparison
The UK Supreme Court judgment in Merricks emphasised that the certification process does not generally involve consideration of the merits of the claim (thereby adopting a similar approach to US and Canadian courts). There are, however, two exceptions to this rule, namely: (i) the CAT’s power to grant strike-out or summary judgment in collective proceedings (and to hear such an application at the certification hearing); and (ii) when the CAT is deciding whether to certify a claim on an opt-out, as opposed to on an opt-in, basis, it is entitled to consider the strength of the claims.
Strike-out and/or summary judgment
In relation to strike-out and/or summary judgment, the CAT emphasised in both cases that there is no material difference in approach following Merricks: the question is whether the claim has a real, as opposed to “fanciful”, prospect of success at trial, having regard not only to presently available evidence but also that which may reasonably be expected to be produced at trial (including in the form of disclosure from defendants). For instance, in Gutmann, the Defendants had argued that the unfair pricing claim – that train operating companies do not make cheaper boundary fares sufficiently available for Travelcard holders to purchase or make passengers aware of their existence – did not reflect the law on abuse of dominance and thus had no prospect of success at trial. The CAT disagreed, finding that the categories of abuses of dominance were not closed. In the CAT’s view, if the charging of unfair and excessive prices, or the use of unfair trading terms, could constitute an abuse, then it did not appear extraordinary or fanciful to contend that the operation by a dominant company of an unfair selling system could constitute an abuse. To the extent that the category of abuse was an extension of the law, it was not a dramatic extension, and the CAT emphasised that competition law looks to the substance rather than form.
Likewise, in Le Patourel, the CAT had little difficulty in finding that, given the scale of the discount accepted by BT, the excessive pricing claim advanced by the class representative, supported by expert evidence and the concluding review of Ofcom into BT’s pricing practices, surpassed the strike-out and/or summary judgment threshold.
Opt-in vs opt-out
In relation to the issue of opt-in vs opt-out in Le Patourel, BT’s position was that an opt-in claim would be more appropriate because the class members would all be easily identifiable as customers of BT (and indeed contactable in most cases). However, the CAT agreed with Mr. Le Patourel that there was little prospect that class members would be sufficiently proactive to opt in. In addition, the claim was technical in nature and so consumers would be unlikely to be able to conduct their own assessment of the case when determining whether to opt in; and if too few consumers did opt in, then the claim would be liable to fail due to a lack of funding. Likewise, in Gutmann, the CAT found that it was not practical for opt-in proceedings to be brought, determining that the small amount of estimated individual recovery would mean that very few persons would be likely to opt in, and the large size of the class (approximately three million passengers) would make opt-in proceedings difficult to manage. The train operating companies argued that if few class members would choose to opt in that demonstrated that few would submit a claim after an award of aggregate damages. The CAT indicated that it was not impressed by that contention, and observed that participating in potentially lengthy and uncertain litigation was a very different proposition from coming forward to claim even a modest payment.
More broadly, the CAT helpfully clarified that where proposed class representatives seek certification on an opt-out basis only, they will still need to satisfy the CAT that an opt-out action is more appropriate than an opt-in action, by reference to the factors in Rule 79(3) of the CAT Rules 2015, which include the strength of the claim. In that regard, paragraph 6.39 of the CAT’s Guide to Proceedings 2015 gives the example of a follow-on damages claim (i.e., a claim covered by a decision of a competition authority) as being generally of sufficient strength to be certified on an opt-out basis. However, as Gutmann and Le Patourel are each standalone claims, it is now apparent that it is not only follow-on claims that can be of sufficient strength to be pursued as opt-out proceedings.
Points of distinction
For a claim to be eligible for collective proceedings it must: (i) be brought on behalf of an identifiable class of persons; (ii) raise common issues; and (iii) be suitable for collective proceedings, particularly for an aggregate damages award. In Le Patourel, the Defendants did not argue that the claim was ineligible for collective proceedings. In the Gutmann claim, by contrast, the Defendants sought to challenge the claim’s eligibility for collective proceedings on a variety of grounds, focusing in particular on whether class members have sufficient ‘common interest’ to form a homogenous class of claimants.
Before considering the CAT's full determination of the above eligibility test in the Gutmann claim, it is interesting to note that the CAT has previously taken a more restrictive approach to its interpretation of this test. Indeed, the first collective claim to be officially certified by the CAT – the Merricks claim – was originally refused certification by the CAT in July 2017. It was only after a series of appeals that the Supreme Court finally clarified, by reference to Canadian law, the proper (less restrictive) approach to be taken vis-à-vis the application of the eligibility test to a collective claim. It is in this broader context that the CAT certified the Gutmann claim as being eligible for collective proceedings.
(i) Class of persons
The first criterion of eligibility – that the claims are brought on behalf of an identifiable class of persons – was uncontroversial. The CAT found the Gutmann claim was clearly brought on behalf of all Travelcard holders that have travelled on Southwestern and/or Southeastern routes, and was thus satisfied that the proposed class definition was enough to constitute an identifiable class of persons.
(ii) Common issues
The second criterion of eligibility – that the claims raise common issues – was more contentious. In considering the principles to be applied to this question, the CAT conducted an extensive survey of Canadian law and noted that there were important similarities between UK and Canadian law, namely: (i) the common issues requirement should be interpreted purposively, having regard to the object of the collective proceedings regime; (ii) it is not necessary for common issues to predominate, but if several significant issues are common, that will favour certification; (iii) a common issue does not require every class member to have the same interest in its resolution – put another way, commonality refers to the question, not the answer, and there can be a significant level of difference between class members, and the question may receive varied and nuanced answers depending on the situation of different class members; and (iv) the expert evidence adduced to demonstrate that an issue is common must be sufficiently credible or plausible, but this is not an onerous test.
However, the CAT also drew important points of difference between the Canadian and UK approach to common issues. First, the CAT remarked that “common issue” is the statutory term used in the legislation of the Canadian common law provinces. That expression does not appear in the UK statute, which refers to the requirement for “the same, similar or related issues of fact or law.” In fact, the UK statutory wording corresponds more closely to the formulation used in the Quebec class proceedings statute (“identical, similar or related questions of law or fact”), which is a broader and more flexible concept than “common issues” as used in, e.g., Ontario and British Columbia. Second, the approach of the Canadian courts has frequently been to segment the proceedings between a common issues trial, to be followed by trials of the individual issues. Although this segmentation is also available in the UK, it is not expected to be the approach when the class representative puts forward a tenable claim for aggregate damages. Third, in contrast to collective claims brought in the Canadian common law provinces, the UK statute provides that aggregate damages may be used to prove class-wide loss, not just class-wide quantum. In other words, in the UK, for the purpose of establishing causation, a tenable claim for aggregate damages dispenses with the requirement to undertake an individual assessment of the amount of damages recoverable by each class member. In making this finding, the CAT relied on the judgment of Lords Sales and Leggatt in Merricks, which held that the provision that the CAT may make an aggregate award of damages dispensed with the requirement to undertake an assessment of damages recoverable by each represented claimant for all purposes antecedent to an awards of damages, including proof of liability as well as quantification of loss. This last point is significant as it facilitates the recovery of loss caused to large classes of consumers who may have small individual claims, which would otherwise be impracticable to bring on an individual basis.
Last, the CAT referred to some US authorities, on which the Defendants had sought to rely to contend that a class could not be certified if it contained ‘uninjured’ members. In distinguishing those cases, the CAT noted that requirements for class certification under the US Federal Rules of Civil Procedure are different from the UK and Canadian regime: in particular, they include the requirement of “predominance” of common issues. The CAT also noted that US jurisprudence was not consistent on this point. On that basis, the CAT found that it derived little assistance from the US authorities.
The CAT then applied these principles to the Defendants’ arguments. As noted above, the focus of the Defendants’ challenge was the contention that each claimant had a distinct case on causation, and the Defendants were entitled to test causation on an individual basis. The Defendants put forward a series of examples to illustrate this submission. They noted that: (i) another ticket than a boundary fare might in fact have been cheaper; (ii) another available discount than a boundary fare might in fact have been more attractive; (iii) instead of a boundary fare, a ticket direct from the station at the edge of the Travelcard’s zonal boundary might have been purchased instead (a “point-to-point fare”); (iv) a passenger might not have had their Travelcard with them when seeking to purchase a boundary fare, and therefore not be entitled to the fare; (v) a passenger might be carrying an invalid Travelcard, and therefore would not be entitled to the fare; (vi) a passenger might not have made the effort to seek out the cheaper boundary fare, potentially because the passenger would be a business traveller who would be reimbursed; or (vii) a passenger simply may not have cared about price-optimisation.
The CAT considered all of these examples. In the case of example (iii), it agreed with the Defendants that when a direct ticket was purchased that was equivalent to a boundary fare, and likely an equivalent price, no loss was likely have been suffered. However, the solution to this problem was to amend the class definition to remove passengers who had purchased “point-to-point fares” from the class. For all the other examples, the CAT considered that they either raised common questions, even if they might have varied or nuanced answers, and as such they were validly common issues, or they were of limited or minimal relevance.
(iii) Suitability for collective proceedings
After considering common issues, the CAT moved on to the third and final criterion of the eligibility test: whether the claims are “suitable” to be brought in collective proceedings. Rule 79(2) of the CAT Rules 2015 sets out seven factors – at Rule 79(2)(a)-(g) – which are relevant to the determination of this question. In Merricks, the Supreme Court clarified that these factors are to be weighed in the balance against one another, and that no one factor is determinative. Further, when applying this multi-factorial test, the assessment of suitability is a relative one, to assess that claims should be relatively more suitable to be brought in collective, rather than in individual proceedings.
In conducting its assessment, the CAT took into account the seven factors, and, in relation to six of those, concluded that the claims were clearly more suitable to be brought in collective rather than individual proceedings. For all the reasons considered in the judgment: (i) collective proceedings were a fair and efficient means for the resolution of the common claims; (ii) no separate claims had been brought by members of the class; (iii) the size of the class was large but manageable; (iv) the class was defined in objective terms and was readily identifiable; (v) the claims were suitable of an aggregate damages award; and (vi) there was no available option for alternative dispute resolution.
Interestingly, when considering the other remaining factor as to suitability – the costs and the benefits of continuing the collective proceedings – the CAT concluded that the cost-benefit analysis came out slightly against the grant of a CPO. The CAT remarked that the claims’ budget of a little over £11 million and the relevant stakeholders’ potential return on investment were both substantial in of themselves, and also when compared to the claim value of £93 million (exclusive of interest). The CAT also considered the likely uptake of damages in the proceedings, and although the CAT noted that it was difficult to speculate as to what the likely uptake would be, it appreciated the risk that it might be very low. The CAT noted that the uptake of a damages award was not the only measure of benefit, and that collective proceedings promote justice by ensuring wrongdoers take full account of the harm they are causing the public. Nevertheless, applying the multi-factorial test, and weighing all seven factors against one another, the CAT then found that the balance came down clearly in favour of a finding of suitability.
The certification decisions in Le Patourel and Gutmann are comparable as both related to standalone claims for exploitative conduct – excessive and unfair pricing – in abuse of a dominant market position. In each case the CAT found that the merits test at the certification stage was satisfied, and that the alleged abuse was reasonably arguable. This is good news for claimants looking to bring standalone claims for competition harms, as it shows: (i) the evidential burden at the certification stage is not onerous; (ii) that materials such as regulatory materials or consumer surveys can be drawn upon; and (iii) that the CAT will not be sympathetic to arguments that such evidence is not fit for purpose (at least at the certification stage).
Standalone collective proceedings currently comprise a significant proportion of the applications pending before the CAT, including Qualcomm and the two “app store” claims recently filed against Apple and Google, and the principles laid down by the CAT in the Le Patourel and Gutmann claims are likely to be helpful in clarifying and narrowing the issues between the parties in those cases.
Taken as a whole, the CAT’s application of the suitability test in Gutmann is an interesting development in the UK collective regime as the judgment confirms for the first time that a prospective claim can still be found suitable on balance, even if the cost-benefit analysis is not satisfied, and it will be interesting to note how the CAT addresses this balancing exercise in future judgments.
Further, the Gutmann case contains a seminal finding on the approach to causation as a common issue. The determination that an aggregate award of damages dispenses with the requirement to assess causation on an individual basis establishes a workable framework for cases on behalf of large groups of claimants to proceed on a collective basis, even when their position on causation may give rise to common questions with varied or nuanced answers.
These findings are likely to be of significance in a number of actions that are still to be adjudicated, and given the increasing pace with which the CAT is addressing certification questions – such as in Le Patourel – we may expect to see them applied again before long.
  CAT 28.
  UKSC 51.
  CAT 30.
  CAT 31. In the Gutmann claim, Hausfeld represents the successful class representative, alongside co-counsel Charles Lyndon.
  UKSC 51, paragraphs 113-114.
  CAT 31, paragraph 64.
  CAT 31, paragraphs 64-65.
  CAT 30, paragraph 124.
  CAT 30, paragraphs 114-115.
  CAT 31, paragraph 183.
  CAT 30, paragraph 110;  CAT 31, paragraph 182.
  CAT 30, paragraph 124;  CAT 31, paragraph 184.
 Competition Appeal Tribunal Rules 2015, Rule 79(1).
  CAT 31, paragraph 107.
  CAT 31, paragraph 108.
 See, Section 47C(2) of the Competition Act 1998.
 See,  UKSC 51 paragraph 97, emphasis added.
 See, In re Asacol Antitrust Litigation, 907 F.3d 42 (1st Cir 2018).
 See, Torres v Mercer Canyons Inc. 835 F.3d 1125 (9th Cir. 2016).
  CAT 31, paragraph 178.
*Luke Streatfeild is a Partner and Charles Laporte-Bisquit is an Associate in the London office.